GM's Confident It Is Speeding Toward Profitability

The smile on the face of General Motors Chairman Ed Whitacre Jr. says it all. The quiet confidence from GM Vice Chairman Steve Girsky makes it clear. Read between the lines, you'll see GM is speeding toward profitability. And don't be surprised if it happens when the automaker reports first quarter financial results in mid May.

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Ed Whitacre

Listen to what the Whitacre and Girsky told me today at GM's Fairfax plant in Kansas City, Kansas when I asked about GM turning a profit. (see video below for full interview)

The GM Chairman said, "I'm not going to speculate, wait 'til you see our first quarter results, you'll be impressed."

Girsky added, "Last month was a big month, a lot of incentives came at the market. Toyota led the markets with a lot of incentives.

The old GM would have thrown a lot of money at this market just to catch up with everyone else, this GM is showing more discipline and I think you'll see that in the financial results"

Given GM was practically break-even in the fourth quarter when auto sales were far weaker, you can see GM is about to break through.

While profitability would not be the only reason for GM paying off its loans to the U.S. and Canadian governments, the company would not have done so yesterday if it didn't feel greater confidence in it's financial standing.

So why has GM improved so quickly? Attribute it to stronger auto sales and a re-focused GM.

As the economy improves and more people return to showrooms, revenue from sales is picking up.

So when you have a company structured to break-even with annual sales at 10.5 million and the pace of sales is 11.5-12 million the company is close, if not over the profit threshold.

But even more important is something Steve Girsky noted: GM is staying disciplined. Its inventories are lean (frankly too lean) so dealers can command the pricing they want on hot sellers like the Chevy Equinox.

In addition, GM is much more judicious about fighting the incentive wars with competitive, but not outrageous rebates.

All of this speaks to the change in culture at a company that historically chased sales at the expense of profit margins. I could be wrong, but from where I sit, I see GM driving out of money-losing position within the next month.